Analyse the advantages to PGC of using enterprise resource planning (ERP).

Mark scheme

Marking points from the official mark scheme (May/June 2021). The mark or mark type is shown in brackets.

1. Knowledge: ERP is using dedicated software to integrate orders, materials, labour and distribution to minimise cost, reduce inventory levels and waste
2. Knowledge: ERP enables customer orders to match raw material supplies to enable JIT
3. Knowledge: ERP can improve a business' efficiency in relation to: inventory control, costing and pricing, capacity utilisation, responses to change, management information
4. Knowledge: Benefits of ERP: Helps with inventory control.
5. Knowledge: Benefits of ERP: Reduces cost of ordering and holding inventory.
6. Knowledge: Benefits of ERP: Links information between departments – management information.
7. Knowledge: Benefits of ERP: Choosing best suppliers and most cost-effective suppliers and supporting JIT manufacturing.
8. Knowledge: Benefits of ERP: Allocating jobs to appropriate production employees.
9. Knowledge: Benefits of ERP: Benefits of ERP: Forecasting demand.
10. Knowledge: Benefits of ERP: Improved efficiency in terms of costing and pricing.
11. Knowledge: Benefits of ERP: Improved efficiency in terms of capacity utilisation.
12. Application: Supplies of coffee beans, roasting, packaging ground coffee.
13. Application: Customers are 600 small retail outlets.
14. Application: Too much inventory is being held.
15. Application: Customers expect fast delivery.
16. Application: Coffee is wasted by being stored too long.
17. Application: New roasters.
18. Application: Possible expansion plans include cafes, selling tea.
19. Application: Expansion plans rely on reducing costs.
20. Application: Link to mission statement 'Quality coffee for everyone when they want it'.
21. Application: Selling price per tonne drops from $20 to $10 once ground coffee is 7 months old and to $0 after 12 months.
22. Analysis: ERP enables customer orders to match raw material supplies to enable JIT. This will reduce PGC costs of storage and reduction in value of ground coffee due to ageing.
23. Analysis: Enables PGC's orders to be delivered quickly, providing better customer service and meeting customer expectations of fast delivery. This will help retain customers.
24. Analysis: Might enable quick decisions on marginally priced orders increasing profitable sales.
25. Analysis: Reduces cost of ordering and holding inventory, this will increase profit.
26. Analysis: All departments can access same information so reduces communication problems that could lead to customer dissatisfaction.
27. Analysis: Reduces waste due to deterioration in overlong storage thus improving efficiency.
28. Analysis: Enables rapid response to change and customised pricing improving customer service.
29. Analysis: Can be adapted to enable/facilitate expansion or new products.
30. Analysis: Increases competitive advantage, this may help reverse decline in PGC's market share.